Abstract:
Does economic inequality influence citizens’ support for democracy? Political economy theory suggests that in a country with high inequality, the majority of the population will support democracy as a potential mechanism for redistribution. Much of the survey and area-studies literature, by contrast, suggests that inequality generates political disillusion and regime dissatisfaction. To clarify this disagreement, we distinguish between prospective versus retrospective evaluations as well as between egocentric versus sociotropic evaluations. We test the resulting hypotheses in a multilevel analysis conducted in 40 democracies. We find that citizens are retrospective and sociotropic, meaning that higher levels of economic inequality reduce support for democracy amongst all social classes. We also find a small prospective egocentric effect, in that the reduction in democratic support in highly unequal countries is slightly less severe amongst the poor, suggesting they believe that democracy might increase future redistribution.

I do not see an ungated copy, but the data for the paper are available here.

It’s not envy. The economy works better when there is a mass market of people who can afford what the economy can produce. If 1 percent of the population controlled all of the income and wealth then companies wouldn’t have enough revenue to survive. The more wealth is shared the better. If the top 1 percent of income earners earned 10 percent of total income intead of 20 percent then the bottom 99 percent would have hundreds or even thousands more dollars to spend. If I’m selling anything other than luxury goods I want the biggest mass market possible.

The economy works better when there is a mass market of people who can afford what the economy can produce.

Of course you can also have a highly unequal economy where there is a mass market of people who can afford what the economy can produce — the US is a prime example — so I don’t understand the point of this comment.

I don’t understand what you don’t understand. If one person has 1000 dollars and 9 people have 10 dollars then almost all of the 11 dollar products will go unsold. If all 10 people equally shared the pool of money then the economy would sell more items . We are moving from a bell curve of income distribution with a fat middle to an hourglass distribution with concentrations at the poor and rich areas. If you were the company Nest would you prefer the fat bell curve or the hourglass?

I have to see a Pay-per-view fight involving Pacman (he’ll probably win but I wish he would retire, the blows to his head will haunt him later in life I’m afraid), so let me summarize what I have found in original research of the kind I often do, and will only be seen years from now when some PhD confirms the same:

inequality is constant throughout the ages, and peaks and troughs are not that much

Throughout history I have found the top 1% own 30% to 50% of the society’s wealth (not nominally either like the Pharaoh in Egypt, who owns 100%), and the top 10% own 70% to 90% of wealth, be it in income share, assets or net worth. So this fluctuation from 30% to 50% is what makes the Gini coefficient “intolerable” or not, and sometimes the fluctuation between net worth and income is another ‘intolerable’ factor, for example, Sweden has very flat income (low Gini) but higher asset inequality (that is, bosses make the ‘same as’ workers in Sweden, but bosses own ‘all’ the shares).

You read it here first, please don’t forget that, and I bill several hundred dollars an hour to my clients. You’re welcome.

Sweden and the US don’t have *that* different of Ginis: .426 vs .486. Sure it’s different, but it’s not like the US is as high as Italy (.534) or Germany (.504) or something. Finland is right between Sweden and the US, (.465) but no one talks about them “disintegrating”.

Another fine use of choosing data just so, thus showing how the U.S. isn’t really all that bad. Though at least this time, the adjustment is in the link itself – ‘Gini coefficient, before taxes and transfers’

Of course, scrolling just one table down, the numbers look just a bit different. With the 0.378 of the U.S. being not exactly the same as Italy’s 0.337 or Germany’s 0.295, not to mention Sweden’s 0.259.

And since that second set of numbers is based on how a society actual deals with itself in terms of inequality, there might just be a reason why the U.S. could be considered in worse shape.

The methodology that they use only accounts for national transfers, and mostly income taxes (it ignores VAT, excise, all state/provincial/local taxes, etc).

Countries like Sweden don’t have a whole lot of province level transfers, whereas the US states do. Countries like Sweden don’t have a lot of province level income taxes, whereas US states do. And finally, countries like Sweden have extremely harsh regressive VATs and excise taxes, the US does not.

None of this is accounted for in their “taxes and transfers” numbers. Seriously!

The most interesting thing about Sweden isn’t the level of inequality, but the type of inequality. Specifically the findings by Greg Clark that the rich people in Sweden today are pretty much all the descendants of the aristocrats from 1700. A century of socialist ultra-egalitarian ethnically and culturally homogenous social democracy and the same people are in charge as feudalism. If there’s no hope in Sweden, there’s no hope anywhere. Man will naturally segregate himself into nobles and peasants, whether society acknowledges it or not.

One tenth of one percent of the population constitutes those with these family names. I don’t know how can overlook greater mobility in the other 99.9%. This does point to the significance of initial conditions, and maybe the need for inheritance taxes.

So how does this link up to the democratisation process in 19th and early 20th century USA and Britain?

Inequality increased in those states, yet sufferage and democracy expanded.

One way to explain this is that, although the majority became disillusioned, a “hard core” became increasingly committed and able to fight for democratisation (composition shift).

Another way is that “the people” didn’t really “want” democracy, but the powerful thought it was a way they could buy them off, offsetting their political demise, or thought they could use popular support to gain power or money (more of a goal in a high inequality nation where there the “carrot” or “trough” is in front of your nose). Thus an unlinking (or inverse correlation) of attitudes and change, but a link with inequality.

The remaining is that inequality just isn’t much of a driver for democratisation one way or another.

E.g. for instance, the powerful actually did not give democracy as a sop to changing public opinion, against a threat of violent revolution or to enhance their own political power, but due to personal ideological commitment to “the cult of democracy” rather than the cults of autocracy, aristocracy and meritocracy (by my lights a better cult, at least).

What ever happened to Stiglitz’s The Price of Inequality. No armchair bullshit, all (or nearly all) assertions are supported by empirical studies. I’ve noticed a pattern – Nobel Prize winners writings are not near the top of everyone’s reading list.

My own thought is that we could start from the basic utilitarian argument that all incomes should be equal (Jeremy Bentham, 1700’s). But, let there also be pipelines of money (and attention) to support the work of geniuses and the engineers who implement their ideas.